Net sales for the third quarter, ended Sept. 30, were $105.2 million, diluted earnings per share from continuing operations was 18 cents, and adjusted earnings per share from continuing operations was 42 cents.
“We continue to execute on our strategy of increasing the organic growth and profitability of each of our four strategic business units while rationalizing corporate costs in all areas. This has resulted in an accelerating sales growth rate each quarter thus far this year, and positioned us for solid mid-single digit organic revenue growth and the opportunity for meaningful margin expansion in the years to come,” said Brad Mason, Orthofix president and CEO.
Gross profit increased $2.9 million to $81.5 million. Gross margin decreased to 77.5 percent compared to 79.8 percent in the prior year period due primarily to sales mix, the impact of converting to stocking distributors in Brazil in the company's Extremity Fixation Business Unit, and $600,000 of non-recurring expenses relating to Orthofix's U.S. restructuring plan. Non-GAAP net margin, an internal metric defined as gross profit less sales and marketing expenses, was $34 million compared to $36.9 million in the prior year period. The decrease in non-GAAP net margin was primarily due to higher commission expenses from geographic mix in Extremity Fixation and higher rates from Spine Fixation and Biologics distributors, as well as increased sales and use tax benefits realized in the third quarter of 2016.
BioStim sales rose 3.4 percent to $44.4 million, while Biologics proceeds swelled 6.2 percent to $15.2 million, according to the company's latest earnings report. Extremity Fixation revenue climbed 4.7 percent to $25.4 million, and Spine Fixation sales soared 19.3 percent to $20.1 million.
Net income from continuing operations was $3.3 million, or 18 cents per share, compared to $10.4 million, or 56 cents per share in the prior year period. Adjusted net income from continuing operations was $7.7 million, or 42 cents per share, compared to adjusted net income of $6.6 million, or 36 cents per share in the prior year period. EBITDA was $14.5 million, compared to $14.1 million in the prior year period. Adjusted EBITDA was $21.1 million, or 20.1 percent of net sales, for the third quarter, compared to $23.5 million, or 23.9 percent of net sales, in the prior year period.
As of Sept. 30, cash and cash equivalents were $53.9 million compared to $39.6 million as of Dec. 31, 2016. As of Sept. 30, the company had no outstanding indebtedness and borrowing capacity of $125 million. Cash flow from operations was $23.5 million, a decrease of $14.9 million, and free cash flow was $10.2 million, a decrease of $13.9 million when compared to the prior year period.
For the year ending Dec. 31, 2017, the company expects net sales to range between $428 million and $431 million, up from its previous guidance of $422 million to $425 million. Net income and earnings per share from continuing operations were both lowered; net income is now expected to be between $14.2 million and $17 million (down from a previous guidance of $17.7 million to $21.4 million), while earnings per share is estimated to fall between 77 cents and 92 cents rather than 96 cents to $1.16.
Orthofix International N.V. is a global provider of reconstructive and regenerative orthopedic and spine solutions. Headquartered in Lewisville, Texas, the company has four strategic business units: BioStim, Biologics, Extremity Fixation and Spine Fixation. Orthofix products are widely distributed via the company’s sales representatives and distributors. In addition, Orthofix is collaborating on research and development activities with leading clinical organizations such as Brown University, Sinai Hospital of Baltimore, Cleveland Clinic, Texas Scottish Rite Hospital for Children, and the Musculoskeletal Transplant Foundation.